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By Jim Jamieson,
The Province
Thursday, November 02, 2006
The sky is not falling -- although it may appear to be if your financial portfolio was heavily weighted in favour of income-trust investments.
Adrian Mastracci, portfolio manager at Vancouver’s ‘fee-only’ KCM Wealth Management, says, "It's understandable -- especially for retired investors -- to be attracted to higher yield, but the risk they took on was probably more than they understood."
Financial experts and portfolio managers yesterday advised investors not to panic in response to Tuesday's announcement by Finance Minister Jim Flaherty that trust distributions will be taxed as if they were stock dividends.
"The mistakes are made because people are selling with emotion," Clay Gillespie said.
"The thing to do is just to sit on the sidelines for a little while," said Gillespie, vice-president and portfolio manager of the financial adviser.
Stephen MacInnes, chief investment officer, agreed that the best strategy is to stand pat.
"Hopefully the person is looking for the income off these investments, not the capital value. The income won't change for four years. Hopefully that gives you time to adjust to the new reality."
Adrian Mastracci, president of Vancouver-based financial advisor firm KCM Wealth Management Inc., said the most pain from Flaherty's announcement will likely be felt by individual investors.
"I've talked to people who had half of their portfolio in income trusts and today is not a pretty day for them," said Mastracci. "It's understandable -- especially for retired investors -- to be attracted to higher yield, but the risk they took on was probably more than they understood. Trusts have been a bandwagon but sometimes the wheels can come off."
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